The Online Library of Liberty

A project of Liberty Fund, Inc.

• Editor’s Foreword
• Preface to the First Edition
• Preface to the 1962 Edition
• Bureaucracy
• Introduction
• 1.: The Opprobrious Connotation of the Term Bureaucracy
• 2.: The American Citizen’s Indictment of Bureaucratism
• 3.: The “progressives’” View of Bureaucratism
• 4.: Bureaucratism and Totalitarianism
• 5.: The Alternative: Profit Management Or Bureaucratic Management
• I: Profit Management
• 1.: The Operation of the Market Mechanism
• 2.: Economic Calculation
• 3.: Management Under the Profit System
• 4.: Personnel Management Under an Unhampered Labor Market
• II: Bureaucratic Management
• 1.: Bureaucracy Under Despotic Government
• 2.: Bureaucracy Within a Democracy
• 3.: The Essential Features of Bureaucratic Management
• 4.: The Crux of Bureaucratic Management
• 5.: Bureaucratic Personnel Management
• III: Bureaucratic Management of Publicly Owned Enterprises
• 1.: The Impracticability of Government All-round Control
• 2.: Public Enterprise Within a Market Economy
• IV: Bureaucratic Management of Private Enterprises
• 1.: How Government Interference and the Impairment of the Profit Motive Drive Business Toward Bureaucratization
• 2.: Interference With the Height of Profit
• 3.: Interference With the Choice of Personnel
• 4.: Unlimited Dependence On the Discretion of Government Bureaus
• V: The Social and Political Implications of Bureaucratization
• 1.: The Philosophy of Bureaucratism
• 2.: Bureaucratic Complacency
• 3.: The Bureaucrat As a Voter
• 4.: The Bureaucratization of the Mind
• 5.: Who Should Be the Master?
• VI: The Psychological Consequences of Bureaucratization
• 1.: The German Youth Movement
• 2.: The Fate of the Rising Generation Within a Bureaucratic Environment
• 3.: Authoritarian Guardianship and Progress
• 4.: The Selection of the Dictator
• 5.: The Vanishing of the Critical Sense
• VII: Is There Any Remedy Available?
• 1.: Past Failures
• 2.: Economics Versus Planning and Totalitarianism
• 3.: The Plain Citizen Versus the Professional Propagandist of Bureaucratization
• Conclusion

2.

The American Citizen’s Indictment of Bureaucratism

An American, asked to specify his complaints about the evils of progressing bureaucratization, might say something like this:

“Our traditional American system of government was based on the separation of the legislative, the executive, and the judicial powers and on a fair division of jurisdiction between the Union and the States. The legislators, the most important executives, and many of the judges were chosen by election. Thus the people, the voters, were supreme. Moreover, none of the three arms of the government had the right to interfere with the private affairs of the citizens. The law-abiding citizen was a free man.

“But now, for many years and especially since the appearance of the New Deal, powerful forces are on the point of substituting for this old and well-tried democratic system the tyrannical rule of an irresponsible and arbitrary bureaucracy. The bureaucrat does not come into office by election of the voters but by appointment of another bureaucrat. He has arrogated a good deal of the legislative power. Government commissions and bureaus issue decrees and regulations undertaking the management and direction of every aspect of the citizens’ lives. Not only do they regulate matters which hitherto have been left to the discretion of the individual; they do not shrink from decreeing what is virtually a repeal of duly enacted laws. By means of this quasi-legislation, the bureaus usurp the power to decide many important matters according to their own judgment of the merits of each case, that is, quite arbitrarily. The rulings and judgments of the bureaus are enforced by Federal officials. The purported judicial review is in fact illusory. Every day the bureaucrats assume more power; pretty soon they will run the whole country.

“There cannot be any doubt that this bureaucratic system is essentially antiliberal, undemocratic, and un-American, that it is contrary to the spirit and to the letter of the Constitution, and that it is a replica of the totalitarian methods of Stalin and Hitler. It is imbued with a fanatical hostility to free enterprise and private property. It paralyzes the conduct of business and lowers the productivity of labor. By heedless spending it squanders the nation’s wealth. It is inefficient and wasteful. Although it styles what it does planning, it has no definite plans and aims. It lacks unity and uniformity; the various bureaus and agencies work at cross-purposes. The outcome is a disintegration of the whole social apparatus of production and distribution. Poverty and distress are bound to follow.”

This vehement indictment of bureaucracy is, by and large, an adequate although emotional description of present-day trends in American government. But it misses the point as it makes bureaucracy and the bureaucrats responsible for an evolution the causes of which must be sought for elsewhere. Bureaucracy is but a consequence and a symptom of things and changes much more deeply rooted.

The characteristic feature of present-day policies is the trend toward a substitution of government control for free enterprise. Powerful political parties and pressure groups are fervently asking for public control of all economic activities, for thorough government planning, and for the nationalization of business. They aim at full government control of education and at the socialization of the medical profession. There is no sphere of human activity that they would not be prepared to subordinate to regimentation by the authorities. In their eyes, state control is the panacea for all ills.

These enthusiastic advocates of government omnipotence are very modest in the appraisal of the role they themselves play in the evolution toward totalitarianism. The trend toward socialism, they contend, is inevitable. It is the necessary and unavoidable tendency of historical evolution. With Karl Marx they maintain that socialism is bound to come “with the inexorability of a law of nature.” Private ownership of the means of production, free enterprise, capitalism, the profit system are doomed. The “wave of the future” carries men toward the earthly paradise of full government control. The champions of totalitarianism call themselves “progressives” precisely because they pretend to have comprehended the meaning of the portents. And they ridicule and disparage as “reactionaries” all those who try to resist the working of forces which—as they say—no human effort is strong enough to stop.

Because of these “progressive” policies new offices and government agencies thrive like mushrooms. The bureaucrats multiply and are anxious to restrict, step by step, the individual citizen’s freedom to act. Many citizens, i.e., those whom the “progressives” scorn as “reactionaries,” resent this encroachment upon their affairs, and blame the incompetence and wastefulness of the bureaucrats. But these opponents have hitherto been only a minority. The proof is that, in the past elections, they were not in a position to poll a majority of the votes. The “progressives,” the adamant foes of free enterprise and private initiative and fanatical champions of totalitarian government control of business, defeated them.

It is a fact that the policy of the New Deal has been supported by the voters. Nor is there any doubt that this policy will be entirely abandoned if the voters withdraw their favor from it. The United States is still a democracy. The Constitution is still intact. Elections are still free. The voters do not cast their ballot under duress. It is therefore not correct to say that the bureaucratic system carried its victory by unconstitutional and undemocratic methods. The lawyers may be right in questioning the legality of some minor points. But as a whole the New Deal was backed by Congress. Congress made the laws and appropriated the money.

Of course, America is faced with a phenomenon that the framers of the Constitution did not foresee and could not foresee: the voluntary abandonment of congressional rights. Congress has in many instances surrendered the function of legislation to government agencies and commissions, and it has relaxed its budgetary control through the allocation of large appropriations for expenditures, which the Administration has to determine in detail. The right of Congress to delegate some of its powers temporarily is not uncontested. In the case of the National Recovery Administration the Supreme Court declared it unconstitutional. But delegations of power formulated in a more cautious way are an almost regular practice. At any rate, Congress, in acting this way, has hitherto not been at variance with the declared will of the majority of the sovereign people.

On the other hand, we must realize that delegation of power is the main instrument of modern dictatorship. It is by virtue of delegation of power that Hitler and his Cabinet rule Germany. It is by delegation of power that the British Left wants to establish its dictatorship and to transform Great Britain into a socialist commonwealth. It is obvious that delegation of power can be used as a quasi-constitutional disguise for a dictatorship. But this is certainly not the case at present in this country. Congress has undoubtedly still the legal right and the actual might to take back all the power it has delegated. The voters still have the right and the power to return senators and representatives who are radically opposed to any abandonment of congressional powers. In the United States, bureaucracy is based on constitutional grounds.

Nor is it correct to deem as unconstitutional the progressing concentration of jurisdictional powers in the central government and the resulting diminution of the importance of the States. Washington has not openly usurped any constitutional powers of the States. The equilibrium in the distribution of powers between the Federal Government and the States as established by the Constitution has been seriously disturbed because the new powers that the authorities acquired for the most part accrued to the Union and not to the States. This is not the effect of sinister machinations on the part of mysterious Washington cliques, eager to curb the States and to establish centralization. It is the consequence of the fact that the United States is an economic unit with a uniform monetary and credit system and with free mobility of commodities, capital, and men among the States. In such a country, government control of business must be centralized. It would be out of the question to leave it to the individual States. If each State were free to control business according to its own plans, the unity of the domestic market would disintegrate. State control of business would be practicable only if every State were in a position to separate its territory from the rest of the nation by trade and migration barriers and an autonomous monetary and credit policy. As nobody seriously suggests breaking up the economic unity of the nation, it has been necessary to entrust the control of business to the Union. It is in the nature of a system of government control of business to aim at the utmost centralization. The autonomy of the States as guaranteed by the Constitution is realizable only under a system of free enterprise. In voting for government control of business the voters implicitly, although unwittingly, are voting for more centralization.

Those who criticize bureaucracy make the mistake of directing their attacks against a symptom only and not against the seat of the evil. It makes no difference whether the innumerable decrees regimenting every aspect of the citizen’s economic activities are issued directly by a law, duly passed by Congress, or by a commission or government agency to which power has been given by a law and by the allocation of money. What people are really complaining about is the fact that the government has embarked upon such totalitarian policies, not the technical procedures applied in their establishment. It would make little difference if Congress had not endowed these agencies with quasi-legislative functions and had reserved to itself the right to issue all decrees required for the conduct of their functions.

Once price control is declared a task of government, an indefinite number of price ceilings must be fixed and many of them must, with changing conditions, be altered again and again. This power is vested in the Office of Price Administration. But the sway of its bureaucrats would not be impaired substantially if they were under the necessity of approaching Congress for legislating such ceilings. Congress would be flooded by a multitude of bills, the content of which would extend beyond the range of its competence. The members of Congress would lack both the time and the information to examine seriously the proposals elaborated by the various subdivisions of the OPA. No choice would be left to them other than trusting the chief of the office and its employees and voting en bloc for the bills or repealing the law giving the Administration the power to control prices. It would be out of the question for the members of Congress to look into the matter with the same conscientiousness and scrupulousness they ordinarily apply in deliberating about policies and laws.

Parliamentary procedures are an adequate method for dealing with the framing of laws needed by a community based on private ownership of the means of production, free enterprise, and consumers’ sovereignty. They are essentially inappropriate for the conduct of affairs under government omnipotence. The makers of the Constitution never dreamed of a system of government under which the authorities would have to determine the prices of pepper and of oranges, of photographic cameras and of razor blades, of neckties and of paper napkins. But if such a contingency had occurred to them, they surely would have considered as insignificant the question whether such regulations should be issued by Congress or by a bureaucratic agency. They would have easily understood that government control of business is ultimately incompatible with any form of constitutional and democratic government.

It is not an accident that socialist countries are ruled in a dictatorial way. Totalitarianism and government by the people are irreconcilable. Things in Germany and Russia would not be different if Hitler and Stalin were to submit all their decrees to the decision of their “parliaments.” Under government control of business, parliaments cannot be anything else than assemblies of yes men.

Neither is it justifiable to find fault with the fact that the offices of the bureaucratic administrators are not elective. Election of executives is reasonable only in the case of top executives. Here the voters have to choose among candidates whose political character and convictions they know. It would be absurd to use the same method for the appointment of a host of unknown people. It makes sense if the citizens vote for President, for Governor, or for Mayor. It would be nonsensical to let them vote for the hundreds and thousands of minor clerks. In such elections the voters would have no choice but to endorse the list proposed by their party. It makes no material difference whether the duly elected President or Governor nominates all his aides or whether the voters vote for a list containing the names of all those men whom their preferred candidate has chosen as aides.

It is quite correct, as the opponents of the trend toward totalitarianism say, that the bureaucrats are free to decide according to their own discretion questions of vital importance for the individual citizen’s life. It is true that the officeholders are no longer the servants of the citizenry but irresponsible and arbitrary masters and tyrants. But this is not the fault of bureaucracy. It is the outcome of the new system of government which restricts the individual’s freedom to manage his own affairs and assigns more and more tasks to the government. The culprit is not the bureaucrat but the political system. And the sovereign people is still free to discard this system.

It is further true that bureaucracy is imbued with an implacable hatred of private business and free enterprise. But the supporters of the system consider precisely this the most laudable feature of their attitude. Far from being ashamed of their anti-business policies, they are proud of them. They aim at full control of business by the government and see in every businessman who wants to evade this control a public enemy.

Finally it is true that the new policy, although not unconstitutional from a merely formalistic viewpoint, is contrary to the spirit of the Constitution, that it is tantamount to an overthrow of all that was precious to the older generations of Americans, that it must result in an abandonment of what people used to call democracy, and that it is in this sense un-American. But this reproach too does not discredit the “progressive” tendencies in the eyes of their supporters. They look at the past with other eyes than their critics’. For them the history of all hitherto existing society is a record of human degradation, misery, and ruthless exploitation of the masses by ruling classes. What is called “individualism” in the American language is, they say, “a high-sounding term for money greed transfigured and parading as a virtue.” The idea was “to give a free hand to money-getters, sharp-witted tricksters, stock manipulators and other bandits who lived by raids on the national income.”1 The American system is scorned as a spurious “bill-of-rights democracy,” and the Russian system of Stalin is extravagantly praised as the only truly democratic one.

The main issue in present-day political struggles is whether society should be organized on the basis of private ownership of the means of production (capitalism, the market system) or on the basis of public control of the means of production (socialism, communism, planned economy). Capitalism means free enterprise, sovereignty of the consumers in economic matters, and sovereignty of the voters in political matters. Socialism means full government control of every sphere of the individual’s life and the unrestricted supremacy of the government in its capacity as central board of production management. There is no compromise possible between these two systems. Contrary to a popular fallacy there is no middle way, no third system possible as a pattern of a permanent social order.2 The citizens must choose between capitalism and socialism or, as many Americans say, between the American and the Russian way of life.

Whoever in this antagonism sides with capitalism must do it frankly and directly. He must give positive support to private property and free enterprise. It is vain to content oneself with attacks on some measures designed to pave the way for socialism. It is useless to fight mere attendant phenomena and not the tendency toward totalitarianism as such. It is idle to dwell on a criticism of bureaucratism only.

[1. ]W. E. Woodward, A New American History (New York, 1938), p. 808. On the jacket of this book we read: “Any right-thinking parent today, conversant with all the facts, would probably find Benedict Arnold in general far more satisfactory than Lincoln as a pattern for his son.” It is obvious that those who hold such views will not find any fault with the un-Americanism of bureaucracy.

[2. ]See below pp. 96–97.